Posted tagged ‘banks’

It’s a Good Time to Be a Bank

October 15, 2018

It’s a good time to be a bank, well a BIG bank anyway. Bank of America’s Q3 profits are up by 32%, JPMorgan/Chase’s by 24%, Wells Fargo by 32% in the 3rd quarter.  Higher interest rates, a strong economy and needed (for smaller banks) regulatory relief have helped but the biggest contributor has been the reduction in the corporate tax rate.  Industry-wide Q3 results have not yet been reported but looking at Q2 and Q1 2018 data compared to 2017 shows the impact of tax cuts.  While banks pre-tax income was up by 12-13% in 2018, net income was up 27-28% because applicable income taxes (federal & state) were down more than 20%.

Bank Earnings

The banking industry has been perhaps the biggest beneficiary of the Trump administration’s initiatives.  Earlier this year I examined over 400 press releases announcing how companies would be using the proceeds from corporate tax cuts and highlighting employee bonuses, minimum wage hikes, etc. (the releases were remarkable in their similarity as were the benefits accruing to employees – a small percentage but more about that in a future post).  Despite banks being only about 1% of all business enterprises thy accounted for just over 30% of the press releases highlighting worker and civic benefits of the tax cut.

press releases

The Changing Banking Market

October 23, 2012

Public antipathy toward large financial institutions  may have been building throughout much of the past decade but it surely peaked during and immediately following the recent recession and the financial crisis that helped precipitate it.  One result appears to be a changing market structure for deposits and loans at financial institutions in NH and across the country.  The recession in our state was less severe than was the recession of the early 1990’s, and less severe than was the recent recession  in  many states because of the the overall health and strength of our state’s banking institutions.  Nevertheless, one fallout from the financial crisis appears to be a growing market share for credit unions in the state.  As the chart below shows, since the recent recession, deposits at credit unions have grown much faster than deposits at NH banks overall.  Deposits at NH community banks have grown faster than deposits at all NH banks, suggesting that deposit gains by credit unions have come largely at the expense of large banks in the state, as deposit growth for all NH banks is much lower than the growth among just community banks.  Prior to the recession and financial crisis, deposits at NH community banks were growing faster than were deposits at credit unions.

It would be unfortunate if community banking institutions that have had strong commitments and links to their local communities  and regional economies are tarred by the actions of institutions from afar. Beyond that, a fundamental change in the market shares for financial services could  have significant impacts on the regulation of financial services, on government revenues , and on market shares as the tax exempt status of credit unions contributes to their ability to compete and capture market share.  The increased concentration of deposits in the banking industry that occurred during much of the 1980’s and 1990’s may now  be occurring among credit unions.  As the services credit unions offer and their branching look more and more like those of banks, their ownership and regulatory structure may be the only thing that distinguishes them from banks.


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